The bankruptcy baron said he had agreed to purchase denim maker Cone Mills Corp., which he would then merge into Burlington Industries, once he closes on his acquisition of that firm.
The deal, which follows a similar strategy to the one the financier took in the steel industry, would put together two mills that were once among the nation’s largest. The new entity would be the largest denim producer in North America, sources said.
But Cone first has to file for bankruptcy.
In a statement revealing the deal, Greensboro, N.C.-based Cone said it had missed a $4.1 million interest payment on its bonds that had been due Sept. 15, though the terms of the loan give it a 30-day grace period. The mill said it expects to file a Chapter 11 bankruptcy petition “within the next several days.” If the deal is approved by the bankruptcy court, Cone said it expects to close the sale within three months.
While the company did not disclose the purchase price, it said in the statement, “It is not expected that the proceeds of the proposed transaction will be sufficient to satisfy the company’s secured indebtedness. As a result, there is not expected to be any recovery for the company’s shareholders.”
A source close to the situation said the proposed purchase price was less than $100 million.
According to filings with the Securities and Exchange Commission, on June 29, Cone’s long-term debt came to $99.2 million, with total liabilities amounting to $238 million. The balance sheet showed $327.3 million in assets, making stockholders’ equity $89.3 million.
Cone shares did not change hands in New York Stock Exchange trading Tuesday, remaining at $1.08 for a market capitalization of $28 million.
In a phone interview Tuesday, Ross, who serves as chairman and chief executive officer of New York investment concern W.L. Ross & Co., said he thought Cone would be a good fit with Burlington. As reported, Ross has agreed to pay $614 million to buy Burlington out of bankruptcy, in a deal expected to close next month.